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Digital Island Announces Cutbacks

Digital Island (www.digitalisland.com) has announced its second quarter results for the period ending March 31, 2001, and also announced that is reducing its staff in two rounds of layoffs totaling 22 percent by June 30, 2001.

The company announced a four percent increase in revenue from the previous quarter, from $31.6 million to $32.8 million, and an increase by 190 percent from the previous year. Despite a growth in revenue the company saw its net loss increase to $1.1 billion from $92.7 million in the second quarter of 2000.

"The slowdown in both the economy and technology spending resulted in fewer new customer wins during the quarter, but this was offset by strong recurring revenue from our top enterprise customers,'' said Ruann Ernst, chairman and CEO of Digital Island in a statement. "We continue to make substantial progress in penetrating the largest enterprise customers in our key markets of financial services, media and entertainment, and high technology,'' she continued.

A Digital Island spokesperson stated that the company saw a slowdown in events-based activities, which was a partial catalyst for the cutbacks. The first round of layoffs took place Tuesday, with 12 percent of its workforce totaling 113 people, losing their jobs. An additional 10 percent will be eliminated by June 30, 2001, bringing the total count to 203. The layoffs are spread throughout the company, not focusing on a particular division, however the spokesperson indicated that it is now outsourcing its help desk and IT support.

The company is also planning on consolidating its regional offices to cut costs, but have not publicly announced which offices will be affected.

"Digital Island has moved quickly to bring expenses in line with revenues and ensure our continued path to profitability,'' explained Ernst in a statement. "While the decision to reduce our workforce is always difficult, our targeted reductions do not impact resources in the critical areas of innovation and customer growth and support. We have taken these decisive actions to ensure our business plan reflects current market conditions.''

Digital Island is forecasting it will break even with its earnings before Interest, taxes, depreciation and amortization (EBITDA), in the June 2002 quarter.

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